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Bath University professor - British workers are taking home nearly £5,000 less each year

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Most of us feel like we’ve got less money to spend than we had a few years ago, and now Bath University has put a cash value on it.

A university report, released today, finds typical British workers are taking home nearly £5,000 less a year than they would have done had wages kept up with inflation over the past six years.

The author of the report is professor Paul Gregg from the university’s Department of Social and Policy Sciences.

He says a nearly 20 per cent drop in real (inflation-adjusted) wages shows that meagre gains in the nation’s economy since the financial crisis of 2008 are not trickling down.

The professor said: “The biggest gains have gone to the top one per cent [of earners].The economic model used to be capable of delivering rising living standards for all.

“We’re at the point of starting to recognise that the model is broken and on a more sustained basis than just because we’ve had a recession.”

Professor Gregg says that wages used to grow on a par with productivity, but the link was broken about 10 years when productivity stopped growing and the purchasing power of wages began falling.

Ordinary workers began getting a smaller share of company gains as well as pension pots, while the top workers - managers and chief executives - benefited from inequitable distribution.

While falling unemployment will contribute to wage recovery, which is years behind schedule compared with the last recession, business and government investment is needed to improve productivity.

However the most difficult thing will be how to reconnect earnings with productivity, with requires policy makers to address issues of rising inequality in the labour market.

Professor Gregg said: “A major challenge for government is how to control the extraordinary and rapid increases in pay and pensions to executives, which has far outstripped company profitability. If productivity improvements are to benefit all workers, the issue of wage inequality must come into sharp focus."